Rinehart Offers Co-Trustee to End Children’s Lawsuit

Aug. 5 (Bloomberg) -- Gina Rinehart, Australia’s richest
person, offered to name a co-trustee for a multibillion dollar
family trust fund to end a lawsuit by two of her children.

Her lawyer David Russell today told New South Wales Supreme
Court Justice Patricia Bergin in Sydney that the offer was being
made to resolve claims Rinehart has a conflict of interest in
running the trust, which holds assets valued at about A$4
billion ($3.6 billion).

“It’s a very big step,” Bergin said. “It’s necessary for
you to give reflection and consideration to what has been
offered,” she told Christopher Withers, lawyer representing
Bianca Rinehart and John Hancock, the billionaire’s eldest
children.

Hancock, Bianca and their sister Hope Rinehart Welker sued
in September 2011 to remove their mother, the world’s 40th
wealthiest person with a net worth of $17.9 billion, as trustee
of the multibillion-dollar trust, claiming she breached her
duty, failed to act honestly and has a conflict of interest in
administering the fund. Welker withdrew from the lawsuit in
March and has been added as a defendant.

“If only it were that simple,” Hancock said in an e-mail
today in response to Rinehart’s offer of a co-trustee. He has
asked the court to appoint him, or Adelaide businessman Bruce
Carter, as trustee.

Rio Royalties

Gina Rinehart inherited iron-ore mining assets from her
father, Lang Hancock, and has an agreement with Rio Tinto Group
under which she collects royalties on properties in Western
Australia mined by Rio. Hancock created the trust fund for his
grandchildren, which now holds 23.5 percent of the voting shares
of Hancock Prospecting Pty, the closely held company through
which Rinehart operates.

Three days before the trust was due to vest, on Sept. 6,
2011, Rinehart advised her children the capital gains taxes they
would owe would put them into bankruptcy and advised them to
extend the vesting date to 2068. Rinehart knew there were no tax
consequences for the children if the fund were allowed to vest,
Withers said today.

Hancock and Bianca Rinehart won a court order today forcing
their mother to turn over correspondence between her and
PricewaterhouseCoopers LLP, who provided her with a report on
the tax implications of the trust vesting over objections from
Russell, who called the request “a fishing exercise.”

“We look forward to receiving the background to the PWC
advice,” Hancock said in the e-mail.